The diet of Powerful Owls (Ninox strenua) living at Christmas Hills, 35km north-east of Melbourne was examined by analysis of 686 regurgitated pellets collected over two years. An aid was also developed to help identify potential mammalian prey species based on hair and skeletal characteristics. The following features were found to be most useful in distinguishing between the three species of arboreal marsupials - Common Ringtail Possum (Pseudocheirus peregrinus), Common Brushtail Possum (Trichosurus vulpecula) and Sugar Glider (Petaurus breviceps): - Cross-sectional width of primary guard hairs. - The size and shape of the nasal, frontal, parietal and squamosal bones of the skull. - Dentition. The size and shape of the upper incisor, canine and premolar teeth. The size and shape of the lower incisor and premolar teeth. - The size of the humerus. The Sugar Glider has a much smaller humerus than that of the Common Ringtail Possum and the Common Brushtail Possum. In the Common Brushtail Possum the entepicondyle ends in a very sharp point but the Common Ringtail Possum this point is not as sharp. - The Common Ringtail Possum’s femur has a very prominent trochanter which projects further than that in the Common Brushtail Possum. The femur of the Sugar Glider is distinguished by having a very large depression between the condyle and the trochanter. - The Common Brushtail Possum’s scapula has a narrower lower blade (relative to length) than that in the Common Ringtail Possum. The scapula of the Sugar Glider is smaller in size than that of the other two possums.The pelvic girdle Of the Common Brushtail Possum has a much wider ischium than those of the Common Brushtail Possum and the Sugar Glider. The ilium of the Sugar is much narrower and smaller than that of the other two possums Mammalian prey was found in 89%, insects in 13% and birds in 10% of the pellets. Of the mammals, Common Ringtail Possums occurred most frequently in the pellets over the year. There was no seasonal difference in the frequency of occurrence of Common Ringtail Possums and Sugar Gliders in pellets. However, Common Brushtail Possums were more likely to be taken in spring than in the other seasons. More adult Common Ringtail Possums were taken as prey than were other age classes over the year, except in summer when high numbers of young were consumed by the owls. The habitat of the Powerful Owl was examined by ground surveys and spotlight surveys in sixteen sites within the Warrandyte-Kinglake Nature Conservation Link. Four categories of survey sites were chosen with the following features. Category A - Sites with a dense understorey of shrubs and small trees, as well as many old trees (>10/ha) which might be suitable for nest hollows. Category B - Sites which lacked a dense understorey of shrubs and small trees and containing few or no old trees suitable for nest hollows. Category C - Sites with a dense understorey of shrubs and small trees but containing few or no old trees suitable for nest hollows. Category D - Sites which lacked a dense understorey of shrubs and small trees but having old trees (>10/ha) which might be suitable for nest hollows. High prey densities strongly correlated with the presence of hollows at these sites. In the light of the results, management recommendations were made for the future conservation of the Powerful Owls living at Christmas Hills. The following recommendations were particularly important: 1. Cleared or semi - cleared land within the Warrandyte Kinglake Nature Conservation Link be revegetated using indigenous species of eucalypts and waffles in order to provide a contiguous native forest corridor for the movement of possums and gliders between the Yarra River Valley and the Kinglake Plateau. 2. Continued planting of Eucalyptus spp. and Acacia spp. in the forested areas of the Warrandyte-Kinglake Nature Conservation Link. 3. Continued protection of healthy living trees to provide a continuous supply of hollow trees. 4. No falling of dead standing trees for firewood collecting as these can provide nest hollows for prey species of the Powerful Owl.